Entering into a listing with a seller is a good time for a checklist because there are so many requirements for the broker and the seller to fulfill. At the same time, the inception of the listing is also the time to plan ahead and lay the foundation that will pay big dividends down the road. The trick is to anticipate and answer buyer concerns before they are even raised. It is better to try to get a full picture of what the broker is dealing with up front and work with the seller to head off disaster down the line.

Attacking title from the get-go

There are different approaches and techniques for gathering that all-important title information. The parties to an offer often wrongfully assume that any title problems will be covered by the title insurance policy, but the opposite may be true. A standard title insurance policy will have standard policy exceptions such as construction liens, occupants in possession, adverse possession, easements not of record, boundary disputes, access rights and submerged lands.

Historic information can be gleaned from the seller’s title policy he or she received when the property was purchased. A copy of the deed is also helpful because it contains the owners’ full names and the legal description. 

But current information is also necessary. For this, the listing agent can order a “search and hold” from the title company to see what liens officially appear of record. Even though this is the official word, there may be other potential liens and issues lurking about far from the courthouse steps. To capture these possible threats, the weapon of choice is the recently revised Listing Questionnaire Regarding Title Issues. This will prompt the seller to identify potential title issues that would not be evident from simply examining recorded documents. 

Tell me — and the buyer — about the property condition

It is disclosure time! Finding out about the condition of the property is not always easy. Some brokers will swear that all sellers are hiding something while others are more understanding and chalk up the seller’s selective memory and reluctance to be forthcoming to human nature. Whatever the case, it will serve everyone in the long run if the seller “spills the beans” and provides accurate and complete disclosures. A significant property defect that comes to light after an offer has been accepted or closed will surely come back to bite the seller and make the listing agent miserable.

• Real Estate Condition Report: When the seller completes the RECR, he indicates whether he has notice or knowledge of the listed property conditions. Whether to disclose, for example, fire damage to siding that was subsequently replaced will be determined by the seller, with or without the assistance of legal counsel. Sellers often are reluctant to disclose past defects that have presumably been repaired. But buyers and buyer’s attorneys are more comfortable if the past defect is disclosed, along with information about the repairs made, so that they may investigate for themselves and confirm that the problem was eliminated. The listing agent may encourage full disclosure but always must leave any legal questions to the seller’s attorney. Make sure that the seller understands that if the he makes a full and complete disclosure of the nature and extent of property conditions that may be seen by the buyer as a defect, those conditions may not be listed as defects under the inspection contingency in the REEB-approved offers to purchase. However, if the inspector finds a problem that was much worse than previously disclosed, the buyer could assert that the true nature and extent of the defect was not disclosed and deliver a notice of defects to the seller.
• Lead-Based Paint: To ensure compliance with the federal LBP rules, applicable to target housing, an agent should advise the seller of his or her obligations under the rules, ensure that the seller has performed all activities required under the rules, or personally ensure compliance with the rule requirements. Compliance includes the completion of an LBP addendum such as the WRA Addendum S.
• “As-is”: The prudent listing broker will explain the consequences of an “as is” sale to sellers who are interested in this concept. Generally, an “as is” clause means that the seller (1) will not make any property condition disclosures in the offer or in any seller condition reports, leaving the buyer primarily responsible for determining the condition of the property, and (2) will not repair the property or “cure any defects.” The seller may still need to make some disclosures if latent or dangerous defects or other special circumstances are present. Whether the seller should adopt this strategy is a question for the seller’s attorney.
• CLUE report: Assuming a seller’s memory of property defects is not perfect, it would be an excellent idea to add a provision to all listings asking the seller to provide the listing broker with a copy of the Comprehensive Loss Underwriting Exchange (CLUE) report on the property. The CLUE report provides a five-year history on the property that may show undisclosed defects or reveal a history of problems that may impact the buyer’s ability to get insurance. Sellers may request a copy of their CLUE report at www.choicetrust.com.
• License inspection: With respect to the listing agent’s inspection of the property, no written record is required, but brokers may require all listing agents to keep a written record of their observations, using a form like the WRA “Listing/Selling Visual Inspection Form.” As an alternative, the agent can make notes on a copy of the RECR to see if the agent’s observations match with the seller’s disclosures. If not, the broker may need to disclose the items the seller did not address as material adverse facts should the items fall within those standards.

Listing contract 

The seller has agreed that you will be their listing broker so it is time to sign them up by executing a listing contract. As the broker walks the seller through the listing, the following issues pop to the surface:

• The listing contract addresses items that are included or not included in the list price. Take the time to tour the property with the seller and try to get a complete list of items that might be considered by a buyer to be personal property and whether they are staying with the property or going with the seller. Also try to pinpoint items that are rented and insert them on the proper line in the listing. 
• It is wise to ask the sellers about any prior listings, offers and showings, and whether the sellers have received any lists of protected buyers. Also, are there any persons the sellers wish to exclude from the listing?
• The Compensation to Others section should be carefully completed. Sellers may take quite seriously the co-broke compensation stated in the listing and may become upset if the co-broke offered does not match up. Some become so upset that they file a complaint with the REEB.
• In order to e-mail listing contract amendments or notices, such as a protected buyers list, the seller must consent electronically to the use of e-mail, and the listing contract must be modified to provide for e-mail delivery. 
• If the listing has a variable commission or is a limited-service listing or a short sale, those facts should be stated in the listing and typically disclosed in the MLS. Some brokers also indicate in the MLS if a deed other than a warranty deed will be required, for instance, a trustee’s deed is needed because the seller is a trust.
• Make sure that the sellers understand that there is a potential risk of injury, damage and theft when they allow strangers into the property for individual showings or open houses. For security’s sake, tell them to remove keys, credit cards, mail and bills, laptops, iPods, jewelry, crystal, furs and other treasures from the property, or lock them away during showings. Also remove prescription drugs because seemingly honest people wouldn’t mind getting their hands on a bottle of Viagra, Oxycodone or uppers. The sellers also must minimize safety hazards for persons touring the property. The seller also is responsible for Fido and Fifi. If possible, they should be removed during showings because not every buyer will love them the way the seller does, and the seller does want the buyers to love the property. If Fido and Fifi do not love the buyers and bite them, the seller will be liable. 

This is only a partial summary of the items the listing broker will likely have on her listing checklist. The examples here are from residential transactions but brokers can tailor a checklist specific to other property types. Having a customized company checklist that includes the issues and concerns of the local market and integrates the broker’s experiences is the ideal tool for shutting down problems before they have a chance to occur.

Resources 

Legal Update 02.07, “Duty to Disclose,” at www.wra.org/LU0207; October 2009 Legal Update, “Diligent Disclosure,” at www.wra.org/LU0910

May 2010 Legal Update, “Lead-Based Paint in Target Housing” at www.wra.org/LU1005

October 2007 Legal Update, “WB-1 Listing Contract - 2008 Revisions” at www.wra.org/LU0710

Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.